Tax Deductions & Benefits regarding Homeownership

Being that April is "tax month," we have decided to show you another benefit of home ownership from an angle of items you can write off against your income. I am sure some of you are already aware that property taxes, mortgage interest, points paid to lower the interest of your loan and in some cases moving expenses are tax deductible. All of this, plus for the first time homebuyer (first time home buyer, meaning you haven't owned a home in the last 3 years) you benefit from the $8000 tax credit we had talked about in our last issue.  So below we have included a very simple example of the benefits.

Current Rent:                                $1,200
Mortgage Payment goal:                $1,500
Actual Mortgage Payment:             $1,800

Mortgage Amount:                         $225,000
Interest Rate:                               5.5%
Yearly Property taxes:                   $3,500

Tax Deduction Calculation:

Multiply mortgage amount by interest rate to get interest deduction
(i.e. $225,000 x 5.5% = $12,375)
Then add interest and taxes to determine total deduction:

                Interest:                        $12,375
                Taxes:                          $3,500
                Total Deduction:             $15,875

Take the total deduction times the standard tax bracket (30%) to get you annual savings:

                                                                $15,875
                                                                X 30% (tax bracket)
                                                                $4,762.50 Annual Savings

                                                                $396.88 Monthly Savings

Coldwell Banker Red Top Realty nor any of its employees are a tax advisor. The above information is for illustration purposes only. Each individual should consult with their own tax advisor to determine the amount of tax savings that can be expected from home ownership tax deductions.